[Rene’]

Learning about tax loss harvesting.
I have about 50% of my net worth in a taxable Brokerage account, all in Index funds.

My Fidelity account manager is talking to me about paying them to do tax loss harvesting to bank up enough loss to offset any capital gains earnings.

He said it would cost me around $400 per year for this managed service. Worth it?

Trying to understand if it would be better to just invest the $400 every year instead and just pay the (likely 15%) capital gains tax.

I have no idea how long I would be paying the $400 per year, i.e. how long it would take to build up enough of a loss bucket.

I haven’t paid for any managed services yet, but index funds are pretty much “set it and forget it”.

I realize I could do the harvesting activity myself, but I am a very busy lady and probably won’t be able to manage it like it needs to be managed to be effective.

Anyone else go through this thought exercise before?

[Endri]

Why in the world would you do that?
If you have bought the same funds continuously, and you have kept them over a year they are generally long term gains/losses because they are sold first come first go.

So, let’s say you started buying the SP 500 in 2019 for the first time but you kept buying it even to this day and say your September VOO did poorly and you wanted to sell to tax loss harvest, you can’t,
Because it will calculate how your shares did based on the first shares you bought in 2019 (they will be long term and depending how they did, capital gains or losses).

When it comes to index funds, most of us will not be able to tax harvest because we will generally have long term capital gains not losses.

When it comes to individual stocks, and to people that frequently trade that is a different story.

But you shoild never sell based on ‘saving’ on tax, that is dumb strategy.

[Mark]

I’m also a Fidelity user, and a fan of their excellent platform. I’ve also heard this from F. advisor. Yet, my portfolio is quite robust.

Most positions are all green, with very few negative holdings.

I can see those and tax harvest easily myself. So, if F. wants to do a long-term strategy and sell off negative lots to harvest, but, all my positions are positive, then what exactly are they going to sell?

[Bill]

Just because it has a kinda fancy name doesn’t mean it’s hard. It literally is just hitting the “sell” button. You do have to know the rule about not buying the same fund for +/- 30 days around the sale date (including dividend reinvesting), but that’s it.

Also, there really is no need to “save up” loses.

It’s basically just a tax deduction you apply as soon as you can.

If you have a $1000 loss this year, you take the deduction this year.

[Scott]

I’m assuming this is the ‘separately managed accounts’ product.
The problem is these are the Hotel California of funds…you can check out anytime you like but you can never leave.

Instead of holding say VOO you will end up with dozens and dozens of individual holdings and a phone book size 1099R at the end of the year.

Yes they will look to do the sell Home Depot/ buy Lowe’s to keep you in the sector and realize a TLH but if you decide you don’t want to stay in the program my understanding is you will be left with a portfolio that has a couple shares of dozens and dozens of companies in it and good luck to you managing it on your own.

My presumption is that if there are any benefits (maybe there are), they are largely offset by the fee, so I don’t see it adding a lot other than complexity.

The one use case I can see for direct indexing is if you are an investor who holds massively appreciated positions in the Mag 7 (however that is defined these days) and you want to structure something that is closer to VOO without realizing sizable capital gains.

There you might end up adding positions to what you hold to look more like VOO, and since it avoids realizing sizable gains the complexity might be justified (emphasis on ‘might’..it depends).

[Christopher]

I’ll happily click the “sell” button for you for half the price, just $200! Then I’ll set a timer for 30 days, and click “buy”.

For a small fee, I’ll even look up similar funds to avoid the 30 day waiting period

Loss harvesting is quite easy – it takes literally a few minutes.

[Ann]

I do tax loss harvesting myself at Fidelity. You can find each of your stocks/funds and “individual dividend buys” with a click of a button. I think this info is under cost basis.

Then with another click, you can sell just the lots that lost money. After the lots are sold, you can go into something like “YTD tax information.” You’ll see your short term or long term losses.

Then I use that number to sell something at a gain.

Sometimes I want to get out of a position so I can reposition. I do all this easily and w/o paying anyone money at F.

I do it at the end of the year and spend less than an hour on it. I’ve noticed F has some options like “set up auto harvesting.” Don’t quote me on that, but it’s an option like those words.

I’ve never used that option b/c I’d rather know what is going on and I’m fearful of the auto process.

I’m sure you can find YouTube videos on how to do tax loss harvesting at F where they walk you through the button clicks. B/c I’ve done it multiple times and it was easy, I would not pay some one $400 to do it.

Do it yourself, then go to dinner multiple times w/ the money you saved. Plus, you don’t have to do dishes!

[Frank]

I thought about it for 30 seconds and just said no.
Use Fidelity to custody your assets, but don’t use their “management” services.

They are overpriced and conflicted.

[Rick]

My guess is the cost is regardless of effectiveness. Meaning you pay if they do some tax loss harvesting for you and you pay if they don’t or there is none to do that year.

If that is the case, I would either do it myself as it shouldn’t be that difficult or pay them to do it once every few years and not annually.

[Patrick]

Do it yourself. If you have a tax lot with a decent sized loss, sell it and use the proceeds to buy a similar fund.

As long as it’s sold at a loss, then there is no tax and you’ll be able to use the loss to offset future taxes on gains.

[Ed]

I did it myself a few years back. I sold losers and some winners to simplify the account to place into tax efficient index funds.

Now, of course they’re up quite a bit.

[Louis]

Yes. I use this strategy for a percentage of my portfolio. I would think it would depend on your overall net-worth goals and strategies and as several have commented ‘your own desire to do this yourself vs have someone do it for you.”

But I would ask this: Are you sure they said $400? The reason I ask is that I pay a % on my account.

[Author]

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